In the relentless quest for higher margins, most pipeline operators have long since trimmed the fat – and perhaps some meat as well – from the budget. And the quarterly pressures never end, even when it seems that nothing is left to cut.

But one major expense may have been overlooked: data management.

Acquiring and managing data is at the heart of a pipeline operator’s daily activities, from monitoring production and managing transmission to reconciling discrepancies and preparing regulatory reports. The problem is that someone has to gather the data, turn it into useful information and account for every last decimal. And that adds up to a considerable chunk of overhead. In addition to expending capital for control rooms, database software, servers, SCADA systems and other equipment, the operator also signs paychecks for all the employees who handle the data.

Some innovative operators have pioneered a solution: outsourcing. Just as operators have long used outsourcing to throttle back personnel costs and other overhead, now it’s possible to turn all or part of the data management functions over to a service company.

The real question is why outsourcing has taken so long to become an option. Five to ten years ago, we were beginning to see interest in this type of outsourcing but the technology just wasn’t there. As communications technologies (such as secure Internet access) have improved and won greater acceptance, it has become not only possible, but also cost effective for a company to share data in real time with a service provider. So now the service company can, almost seamlessly, perform tasks that were previously handled in house.

The new reliance on outside data management services is part of a larger, trans-industry trend toward outsourcing technology ownership. For instance, instead of developing or licensing specialized software themselves, companies are turning to applications service providers (ASPs) for access to software only when they need it. Even Microsoft, the king of shrink-wrapped, CD-based software, is considering focusing on an ASP pay-per-use, Internet-based model. In the pipeline world, operators can leverage the economies of scale achieved by a service provider that retains the data management software, keeps it on a server and provides access to multiple clients around the clock.

In addition to the industry’s general acceptance of outsourcing and advances in communications technologies, one other trend is driving the movement toward using data service providers: today, more than ever, pipeline operators need to outsource their data management.

In this sizzling industry assets are quickly developed and rapidly change hands. A company may hold several pipelines, each acquired from a different owner – and each operating with separate, incompatible legacy systems. By outsourcing data management to a service company, the new owners can avoid the expense and hassles of integrating the disparate data systems. Operators can more easily absorb new acquisitions and ensure they are run efficiently.

Outsourcing makes sense for the newly independent pipeline companies that are often spun off from their integrated parents as Limited Partnerships. With their core business focused on operating pipelines, the savings these companies can shave from their data management expenses drop directly to the bottom line.

So, what outsourcing services are available and exactly how do they help reduce costs?

Outsourcing services can range from, installing flow meters to maintaining flow data, providing web access, designing SCADA systems or erecting antennae towers. The service company can also work with the customer’s existing facilities, by either placing staff at the Operator’s offices or by bringing those facilities into the service company.

Not only does outsourcing save customers the cost of installing and staffing their own control centers, but it also improves safety and minimizes incidents and downtime. When an Operator can afford continuous monitoring, operational abnormalities are apparent immediately. It is no longer necessary to wait until a field worker discovers the problem at the site the next day.

Some companies – especially smaller ones that operate with a lean staff of employees – need more than raw data from the service company. They need to outsource the whole gamut of back office services. These services may range from editing, validating and analyzing gas data to identifying the source of lost and unaccounted for gas in order to balance the books.

And it doesn’t end there. Regulatory reporting, designing and implementing geographic information systems (GIS), even responding to One Call communications can all be handled by a data management company.

At budget time, the ability to outsource data management may be a surprising source of long-term savings. And that should make everyone happy… for now. As everyone knows, the pressure on companies to reduce overhead and improve profitability is not going away. Even under the best market conditions, investors will continue to clamor for higher margins, quarter after relentless quarter. And the budget knife will continue searching for greater efficiencies and cost savings.

But with the emergence of data outsourcing, at least it will find a new set of options.